Narayana Murthy on leadership and values

Strategy is all about differentiating yourself in the marketplace to maximise your margins. Differentiation could come through products and services. But your stakeholders must feel you are more and more valuable to them, compared to competitors.

Stakeholders would mean society, customers, employees, government, investors; each must say this company is adding more value to me than any other.

What are ethics and values? They transcend the legal framework and as a society evolves, what is in the realm of ethics and values moves into legality. In India, before Sebi in 1990, a lot of good practices were part of ethics and values.

Today, it is all part of legality. Similarly, in the US, a lot of practices were part of ethics and values before the Blue Ribbon Committee report. My friend John Hunstman, in his book, says that successful people never cheat. That good people never cheat.

Ethics and values can be defined as anything that stands the test of golden behaviour. That is the rule, that you must do unto others what you would like to be done unto you. I define ethics and values in a more elaborate manner.

Ethics and values form the protocol for conduct and behaviour in a community for each of its members. So that enhances the confidence, the enthusiasm, the energy, the joy of everyone else in the community. If I conduct myself as per that protocol of behaviour, it enhances the confidence, the enthusiasm, the energy and joy of everyone else in the company.

As I said earlier, if you want to become unique in the marketplace, then you want all to work hard. If you want 67,500 people in Infosys to agree voluntarily to commit to hard work, then they have to trust the leader.

A leader has to have followers to be a leader. That is why I stood by my controversial decision on CEO's salaries being linked to company's earnings. If you want to enhance the trust of employees in the leader, then the leadership of the company has to conduct itself in a manner that enhances trust.

Also, the CEO or the leader must definitely reap benefits proportionate to the benefits derived by the company.

Never before in the history of business community in the world did we have a situation where trust of man and woman in the street is lowest in business leaders. According to a US survey, corporate leaders are least trusted, as many of them violated codes of ethics and even laws.

On the Indian side, if you have analysed how salaries of CEOs have increased in 15 years, they have gone up from Rs 7,000 and Rs 10,000 to Rs 70 lakh (Rs 7 million) on an average. I am one of those who fought for this. When on board of a company, I saw to it that the CEO had a variable linked to output.

Indeed, salaries of the lowest paid persons have not correspondingly gone up. I won't get into a debate whether this is right or wrong.

But after getting the government to agree to limit on salaries, it is incumbent on our part to live up to expectations and conduct ourselves in a manner that enhances trust of all stakeholders, particularly the government and the society.

The fact that we opened borders in 1991 and welcomed MNCs to operate, has had a tremendous positive impact on value delivered to consumers. But if we have to continue to satisfy our customers we have to conduct ourselves in a manner that is worthy for the simple reason that customers today have a plethora of choices.

N R Narayana Murthy, chief mentor, Infosys Technologies, speaking at the Governance Series session on 'Ethics and Values as Corporate Strategy', organised by the Confederation of Indian Industry in New Delhi, January 17.